My girlfriend and I recent just brought home a 18 week old pup on Sunday. Prior to bringing him home, we met up with him/the breeder twice at their home to interact with the pup and see if there was a bond... and we hit it off immediately. Diesel was energetic, playful and very loving. He seemed very sure of himself and acted like a prototypical pit bull puppy. Unfortunately, from the minute we left their house, that all changed.
He got sick during the long car ride home, and after arriving to his new home, he's been a scared, unsure little guy. I know that he wasn't very well socialized when he was young and was really only familiar with the house he was born in, his mother and sister, and the family that owns them. I'm assuming this is the root of his problems.
We live in the downtown area of a small city... no big metropolitan area but it is relatively busy. When out on walks, Diesel mostly has his tail tucked, ears back, head down, and shivering uncontrollably... essentially cowering from the world around him, sometimes freezing up in the middle of the walk. Cars, leaves, and even the howling wind all scare him. This morning, a fire truck went by with the sirens blaring and you would have thought someone was trying to kill my little man. I can tell that he holds in his pee and poop because of this nervousness too.
He barks at any dogs he sees and at most people. This morning he also barked pretty aggressively at a couple of young boys (roughly 6 or 7 years old) who were walking with their father. This is what worries me the most.
Earlier tonight we took him over to my girlfriend's mother's house (in hindsight, BAD idea). She recently got a pit bull pup who is about the same age as Diesel. The interaction between them didn't go well, the other pup was happy and playful but Diesel was extremely timid and wouldn't stop barking or growling at her. He also was VERY timid around the other people in the house, even growling at them. This was all obviously out of fear, as he wouldn't make eye contact and would always try to hide behind me or my girlfriend.
Inside the house with us, however, he's a completely different dog! Tail wagging 1000 mph and full of love and affection.
I know there's a way to make the REAL Diesel shine thru, we just need some help. My biggest fear is that he will snap at someone one of these days out of nervous fear and you all know how THAT story ends. I'm pretty sure his lack of socialization at a younger age is what is fueling his current fears/problems... what can I do??? Any help is greatly appreciated.

Thanks
-Damien-